My Observations and What to Expect

* S&P 500 1200 is quickly being left in the dust and the new battle ground will be the 52-week highs set in November at 1,227.

* The current rally has the makings of what we saw back on Sept. 1, when we rallied for more than two months.

* Yesterday’s rally, on similar volume to that of Wednesday’s rally, offered the continuation that the bulls were seeking, and further legitimized this market rally. A push above 1,227 would likely trigger another wave of short covering.

* Going forward, I would expect the dip buying to be back in play for investors.

* The U.S. dollar is at an inflection point on its current upward trend. A push below the trend would signal further bullishness for the broader markets. A bounce followed by another leg up would pose a major problem for the bulls.

* The bears must defend the resistance at the November highs. A break there could see S&P rally as high as 1,260s and potentially into low 1,300s (best-case scenario).

* The bulls should look to close above the aforementioned resistance and push the rally into overbought territory.

Actions I Will Be Taking

* Will consider adding some additional long positions to the portfolio today.

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